The Miller Act

In the United States, the law requiring contract surety bonds on federal construction projects is known as the Miller Act (40 U.S.C. Section 270a to 270f).

The Miller Act provides that, before a contract that exceeds $100,000 in amount for the construction, alteration, or repair of any building or public work of the United States is awarded to any person, that person shall furnish the United States with the following:

1. A performance bond in an amount that the contracting officer regards as adequate for the protection of the United States. The bond amount is normally 100 percent of the contract price.
   
   
2. A separate payment bond for the protection of suppliers of labor and materials. The amount of the payment bond shall be equal to the total amount payable by the terms of the contract unless the contracting officer awarding the contract makes a written determination supported by specific findings that a payment bond in that amount is impractical, in which case the amount of the payment bond shall be set by the contracting officer. In no case shall the amount of the payment bond be less than the amount of the performance bond.

The Miller Act payment bond covers subcontractors and suppliers of material who have direct contracts with the prime contractor. These are called first-tier claimants. Subcontractors and material suppliers who have contracts with a subcontractor, but not those who have contracts with a supplier, are also covered and are called second-tier claimants. Anyone further down the contract chain is considered too remote and cannot assert a claim against a Miller Act payment bond posted by the contractor.

A subcontractor or supplier who has a direct contract with the prime contractor has no duty to provide any notice to the prime contractor before filing a suit on the bond. When the claimant is a second-tier subcontractor or material supplier, however, formal notice must be given to the prime contractor within 90 days of the last date the claimant furnished labor or materials for the project.

The final step in perfecting a claim on a payment bond is filling a lawsuit. For both first and second-tier claimants, suit must be filed no sooner than 90 days after the last labor and material were furnished and no later than one year after that date.

Many states in the U.S. have adapted the Miller Act for use at the state level. These state statutes are known as Little Miller Acts.

For a full transcript of the Miller Act, please click here.